Facultad de Ciencias Económicas | fce.ufm.edu | 4 Lecciones

Austrian Monetary Theory Seminar (Part IV)

Aletse López  | 17 de marzo de 2017  | Vistas: 9


In this seminar, Lawrence White gives an insight in the Austrian Monetary Theory,  which includes the ideas of the two most representative of the Austrian School of Economics, Mises and Hayek. It explains how economy works with government intervention and why having no government intervention is the way to go.

In this fourth lesson, White approaches the history of the evolution of money ending up in the most known private digital currency, Bitcoin.

He explains the different stages the money went through since the first type of currency was created.

Currency 1.0: Precious metal coins. Bankers used to weigh coins and to record people deposits in balance sheets on units of gold or silver.

  • Currency 2.0: Private IOUs redeemable for precious metal coins. People did not transfer the ownership of the coins, they now transferred ownership of claims to coins.
  • Currency 2.1: Government IOUs redeemable for precious metal coins. Government got in the business of issuing banknotes. It was not a new monetary standard, it was a new form of a medium of exchange.
  • Currency 3.0: Government Fiat currency. The option to redeem was removed. The government said: “we are not paying anymore”. It became an “IOU nothing”.
  • Currency 4.0: Private digital “IOU nothing” - Bitcoin. Its authenticity is verified by cryptography but its value resides in its universal acceptance .

If you wonder how Bitcoin can have a positive value, you should wonder the same thing about fiat money”

Unlike a banknote, a Bitcoin is not debt contract or liability and is issued by a business enterprise through a computer program, the blockchain. A Bitcoin, then is an “IOU nothing”, as White says, which means that is not redeemable in any other commodity.

The Bitcoin is easily transferable on its own decentralized payment network. It needs no trusted central party. But is not yet widely accepted in payment or as a medium of exchange.

If it’s a money, it’s only a money in a very small circle of people.”

Bitcoin itself is not a for-profit enterprise. It was launched in 2009 as a hobby project and supported by a community of enthusiasts. Now, is surrounded by for-profit exchanges and payment processors. The original program was wrote by Satoshi Nakamoto, a pseudonym.

We didn’t predict Bitcoin, so all we can do is observe.”

Even though Bitcoin has a large market share, it has no monopoly power. Bitcoin has differentiate from all the alt-coins. It started as a cool statement to have a money that is independent from the government. But now, people who are not libertarians use it too.


Nuestra misión es la enseñanza y difusión de los principios éticos, jurídicos y económicos de una sociedad de personas libres y responsables.

Universidad Francisco Marroquín